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Manufacturing Jobs Continue to Decline

11.05.09

Manufacturing Jobs Continue to Decline

by Dustin Ensinger
E-mail - editor@economyincisis.org

http://www.economyincrisis.org/articles/show/3601

Most of the millions of manufacturing jobs lost during the recession will never return as companies find ways to continue increasing production with a scaled-down workforce, according to the USA Today.

Over two million manufacturing jobs have been lost since the current recession began in December 2007. Pressure to cut costs in the midst of an economic crisis coupled with the need to meet the demands of competing in a globalized economy, has led to factories across the country to adopt leaner operations.

According to a study by RSM McGladrey, 61 percent of manufacturers said that they already have or were considering adopting cost-cutting measures in order to maintain profits. In most cases, those cost-cutting measures involve less human labor and more technology.

The trend is nothing new, however. Manufacturers have been scaling back on workforces while increasing production for decades.

Since 1979, manufacturing employment has fallen by 7.8 million, or 40 percent. Over that same time, output has actually risen by $1.1 trillion.

Those facts have led some to speculate that the true culprit behind manufacturing job loss has been technological advancements rather than fatally flawed free trade agreements.

“Because of productivity growth, we have been able to produce more output with fewer workers,” former Federal Reserve Chairman Alan Greenspan told Bloomberg News. “That’s the source of higher standards of living. If employment was moving up exactly in line with output, it would mean that productivity and standards of living had stalled.”

While the standard of living for the average American worker may have indeed risen steeply over the past few decades, those manufacturing workers forced to compete directly with Third World laborers have not seen the benefits.

From 2001 to 2007, workers displaced due to increased trade with China lost an average of $8,146 annually - a total of $19.4 billion - as they moved into lower paying jobs, according to the Economic Policy Institute. The one million Americans whose jobs were displaced by NAFTA were forced to take a pay cut of about 18 percent. Because of NAFTA, U.S. workers lost wages totaling about $7.6 billion in 2004 alone, according to the Economic Policy Institute.

In addition, many economists contend that increased productivity and technological advancements play only a minor role in the massive job losses in the manufacturing sector. Instead, the find America’s exploding trade deficit to be a much greater factor.

“Productivity growth has played the most important role in manufacturing job loss in the recent past, but this growth is to be welcomed over the long-run, as productivity provides the ceiling on how quickly living standards can rise,” the Economic Policy Institute’s Josh Bivens wrote. “Productivity growth, in short, is not a problem. What is a problem, however, is slow demand growth for manufactured goods. Demand for manufactured goods can come from domestic use or net exports. In recent years in the United States, these combined sources of demand have been far too weak to generate employment in manufacturing.”

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